Ahead of the Bell: Analysts wary on American Capital

NEW YORK—While a large first-quarter write-down and accounting changes hurt American Capital Strategies Ltd.'s earnings and book value, they will likely alleviate investor concern regarding the investment manager's portfolio, an analyst said Thursday.

Wachovia Capital Markets analyst Jim Shanahan kept a "Market Perform" rating on the Bethesda, Md., company after it swung to a first-quarter loss on nearly $1 billion in write-downs.

The write-downs do not prohibit the company from raising valuation adjustments if credit markets "continue to improve," he said.

He cut his 2008 earnings estimates to $3.01 per share from $3.14 per share.

Analysts polled by Thomson Financial expect, on average, earnings of $3.20 per share for the year.

The quarterly results led Keefe, Bruyette & Woods analyst Sanjay Sakhrani to cut his price target to $32 from $38 and kept a "Market Perform" rating.

The new target implies he expects shares to rise about 2 percent over Wednesday's $31.29 close.

FBR Capital Markets analyst John Stilmar kept an "Underperform" rating, and said the current share price seems to overlook long-term risks to return-on-equity expectations during the credit crisis.

The stock rose 39 cents to $31.68 in premarket trading Thursday.